Yasmin v. Tariq, 2015 ONSC 1248

CITATION: Yasmin v. Tariq, 2015 ONSC 1248

COURT FILE NO.: FC-14-1318-00

DATE: 20150225

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: NABILA YASMIN, Applicant

AND:

MEHMOOD TARIQ, Respondent

BEFORE: THE HON. MADAM JUSTICE M.E. VALLEE

COUNSEL: Mr. T. Owen, for the Applicant

Dr. A. Saroha, for a non-party lender, Bhan Garg

HEARD: February 19, 2015

ENDORSEMENT

Introduction

[1] The applicant wife brings this motion to set aside a mortgage registered against the matrimonial home, 80 Ferguson Drive, Barrie, Ontario, which the husband obtained from a lender, Bhan Garg, without the wife’s knowledge or consent. Only the husband holds title to the matrimonial home. The lender opposes the motion on the grounds that the husband provided him with a statement that he was separated and the property was not a matrimonial home prior to the lender’s advancing the funds. The lender states that he acquired the mortgage for value, in good faith and without notice that the property was a matrimonial home.

Issue

Did the lender have notice that the property was a matrimonial home when he advanced the funds for the mortgage?

Test to Set Aside a Transaction

[2] Section 21(1) of the Family Law Act states that a spouse shall not dispose of or encumber an interest in a matrimonial home unless the other spouse joins in the instrument or consents to the transaction. Section 21(2) states that a transaction that contravenes subsection 1 can be set aside unless a lender acquired a mortgage for value, in the good faith, without notice that the property was a matrimonial home. Section 21(3) states that if the borrower/spouse makes the statement that he is separated and the property is not ordinarily occupied by the spouses at the time of separation as a family residence, this is sufficient proof for a lender that the property is not a matrimonial home unless the lender had notice to the contrary.

[3] According to McCaskie v. McCaskie, 2002 CarswellOnt 1389, constructive notice may constitute notice to a lender that the property is a matrimonial home. The court commented:

Here there was no actual notice that the property was occupied as a family residence; however, it appears to me that there was constructive notice of this fact. The broker had actual notice of the spouse status. I note that the mailing address on Mr. McCaskie’s mortgage application form, although a postal box in Bancroft, was the same postal box number on the credit report for both Fred and Mary McCaskie. The mortgage application showed that a mortgage was being sought over a business property and a residential property where there had been a residence for four years. The knowledge of these facts should have put Craig Blower on inquiry about the use to which the residence had been put. Similarly, the existing first mortgage on the property was actual notice to the solicitor that a spousal consent had been required or at least given in connection with the mortgage transaction. This naturally would have led to the inference that the property was a matrimonial home when the existing mortgage was registered. That knowledge should have put him on inquiry to determine if and how the status of the property had changed. No inquires at all were made.

Did the Lender have notice that property was a matrimonial home?

The Applicant Wife’s Position

[4] The parties were married in September of 1997 and separated in July of 2014. Their marriage lasted for approximately 17 years. The matrimonial home property was purchased in 2011. As noted above, only the husband took title to the property. At the time of purchase, ING Bank of Canada lent the husband $204,495 and took a mortgage to secure the debt.

[5] On August 18, 2014, the husband borrowed $45,000 from the lender, Mr. Garg who also took a mortgage to secure the loan. The wife states that she had no knowledge of this loan nor did she consent to it. It is obviously registered against title to the matrimonial home.

[6] It should be noted that on the registration of the first mortgage, the husband makes the statement, “I am separated from my spouse and the property was not ordinarily occupied by us at the time of our separation as our family residence.” This statement was also repeated on the registration of the mortgage given by Mr. Tariq to Mr. Garg.

[7] Mr. Garg states that in addition to this, he obtained a signed statement from Mr. Tariq to the effect that he was separated and that the property was not ordinarily occupied by him or his wife at the time of separation as the family residence.

[8] As noted above, s. 21(3)(c) of the Family Law Act provides that this type of statement made by the borrower is deemed to be sufficient proof that the property is not a matrimonial home unless the borrower had notice to the contrary.

[9] The applicant wife states that the lender did have constructive notice that the property was the matrimonial home. At least, he had sufficient notice to “put on him on inquiry to determine if ‘the property was in fact the matrimonial home’.” (see McCaskie para. 43).

[10] It was incumbent on the lender to require that the husband provide a statement from the wife to confirm that the property was not a matrimonial home. Lenders ought not to be able to rely on a borrower’s self-serving affidavit. Where there is an indication that the parties are separated, a lender ought to take a further step to confirm that the property is not a matrimonial home.

[11] It would be most unfair if one party could encumber a matrimonial home without the consent of the other party. In circumstances like these, the lender could provide a loan which the borrower might spend, to the detriment of the other party’s interest in the property.

[12] Here, the wife has been a stay-at-home mother with four children. She was not a business person. She did not concern herself as to who held title to the matrimonial home. Although the husband states that the wife “sat on her rights” since 2011 and did not make arrangements to have her name put on title to the property, which would have constituted actual notice to the future lender, the wife was not required to take any steps to preserve her rights. The Family Law Act provides that she has an interest in the matrimonial home.

Analysis

[13] There is no evidence before the court that the lender knew the parties or that the husband somehow colluded with the lender. I must assume that the lender is a bona fide third party lender and that the loan was an arms-length transaction.

[14] In McCaskie, as noted above, there were certain hallmarks to indicate that the property was occupied as family residence. The parties had the same mailing address. A credit report was obtained for both Mr. and Mrs. McCaskie. The mortgage application showed that it was being sought over a business property and a residential property where there had been a residence for four years. The court in McCaskie determined that these factors should have put the lender on inquiry about the use to which the residence had been made.

[15] Here, there were none of these indicia. The wife argues that the husband’s statement that he is separated should put a lender on inquiry to determine to status of the property.

[16] As noted above, s. 21(3)(c) of the Family Law Act clearly states that if the borrower states that is separated and then the property was not ordinarily occupied by the spouses at the time of their separation, this is deemed to be sufficient proof that the property is not a matrimonial home.

[17] It is certainly unfortunate that a borrowing spouse would make a false self-serving statement which results in an encumbrance on a matrimonial home without the knowledge or consent of the other spouse. Nevertheless, the issue here in whether the lender acquired the mortgage for value in good faith and without notice that the property was a matrimonial home.

[18] The law has not yet advanced to the stage where lenders are required to look behind the statements of the borrowers. The lender was not required to obtain a statement from the wife that the property was not a matrimonial home.

[19] It the wife’s name had been on title to the home, the lender would have had notice; however, only the husband held titled to the home.

Conclusion

[20] Because the husband holds title to the matrimonial home, the wife is not entitled to make a claim for the equity in the home. She is only entitled to an equalization payment based on the husband’s ownership of the home. Given this, I order that there shall be no further dealings with this property until the parties have resolved the issues in their family law proceedings or until further order of this court.

Costs

[21] The wife has not been successful in her motion to have the mortgage transaction set aside or to have Mr. Garg added as a third party; however, it was not unreasonable for her to bring this motion, given the fact that the issue arises from the husband’s misrepresentation to Mr. Garg as to the status of the property. There shall be no costs of this motion.

VALLEE J.

Date: February 25, 2015